The Board’s Platform: Where Ukrzaliznytsia’s Leadership is Leading the Company

Members of the board of the Ukrzaliznytsia public railway company met with business representatives and journalists to discuss the current state of affairs and announce their plans for further reform of the railway industry. We publish the most interesting quotes from them.

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Wojciech Balczun, Ukrzaliznytsia’s board chairman

On corruption

Corruption is a cancer that is eating away at Ukrzaliznytsia from the inside and destroying the company's stable operations and our relations with customers. We want to reduce corruption by 90%.

On passenger comfort

The first thing we want to do is improve the cleanliness of passenger railcars. Board member Ireneusz Wasilewski will be responsible for this. This is not so important in terms of business efficiency, but it means a lot for Ukrzaliznytsia’s image. The society perceives us through the prism of quality, service, and approach to passengers.

We will pay particular to attention to air conditioning of railcars in the summer. Currently, before railcars enter the train station, they are kept in in the sun in the depot, where they become very hot, and the air conditioners are switched off at a temperature of 45 degrees. Therefore, the air conditioner does not begin operation until the train travels a certain distance. Yesterday, we decided to launch a small investment project. Under this project, we will install special power supply points with a voltage of 380 volts at all depots so that passenger railcars can be cooled in the summer and heated in the winter before their departure. This project is intended for two years.

On revenue

Financial stability is the goal of every board. We want to achieve USD 300-500 million in additional “financial results” over the next 2-3 years. We are creating a new system for using our commercial platforms. Train stations will be commercialized and some space will be allocated for advertising. Potentially, this is a great source of revenue since Ukrzaliznytsia is the largest company in Ukraine and our train stations in many cities are located in the city center. Currently, other companies are making money from this.

On UZ Cargo International

We will create a freight division called UZ Cargo International, which will have two subdivisions – the West and East subdivisions. The first will be in charge of our operations in Western Europe, we plan to extend our forwarding services to neighboring countries, and we will obtain licenses for transportation in the western direction. The ‘East’ subdivision will focus on cooperation with Georgia, Azerbaijan, Turkey, and Iran. We must use the ferries we have to perform transportation operations on the Black Sea.

On railway workers’ wages

We need to introduce an efficient system for staff recruitment and personnel evaluation, a new motivational system, and a new wage system. People working in key positions at Ukrzaliznytsia currently earn little, but they are responsible for large amounts of money. This unhealthy system generates corruption temptations and prevents the company from attracting experienced managers. I think we will be able to change this system in the next two months.

On tenders

Our procurement division is far from being ideal. We have already identified the main problems: the problems are at the levels of development of procurement conditions, technical requirements, and the procurement procedure itself. Very often, Ukrzaliznytsia bought unnecessary things but failed to buy the necessary things. This problem has deepened in the past two years. We will prepare new procurement rules by the end of this year. We really want tenders to be competitive and prices for Ukrzaliznytsia to be market prices.

On tickets

We have found that that there is a secondary market for sale of train tickets. We want to eliminate ticket sales by speculators. Yesterday, the board decided to abolish the booking of tickets by commercial customers. This is often used for various corruption schemes. We want to offer train seats to only public institutions, as is the practice in normal countries.

We want to develop a smartphone application that provides the ability to purchase tickets. This is a goal for this year. It may not be technically possible to implement it fully, but such an application will be launched later this year. We will also develop a network of self-service terminals for sale of tickets.

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Ireneusz Wasilewski, member of Ukrzaliznytsia’s board

On repair and modernization

My main task is to make rolling stock more accessible. It will involve changing the maintenance system – it will become more flexible compared with the system that exists today. The period between repairs of rolling stock should increase, and it will be determined based on mileage. We will conduct more inspections, which will allow us to save money on overhauls. The money that is saved will be invested in modernization and construction of new passenger railcars.

We will move away from repairing locomotives that have completed their service lives. We will modernize the other locomotives and do it in a way in which the payback period will be clear. Poland's experience shows that locomotives cannot be modernized in small batches. We will do this in an organized way – through large tenders and in a way in which entire series rather than individual locomotives are modernized.

On production of railcars

We will start producing freight cars at our own production facilities this year and increase the number of modernized passenger cars. Currently, we have scores of locomotive depots and practically 100 railcar depots. We want to reduce their number and introduce specialization based on types of rolling stock. We want to begin making the most of our technical resources – 24 hours a day is the best approach that will help to reduce costs.

On optimization

We cannot invest in two or three locomotives from different manufacturers. It is necessary to have a series of locomotives that is as large as possible and for us to be confident that we will use them the next few years. As for passenger rolling stock, the issue of commuter trains or railcars with berths remains open. Surplus rolling stock should be withdrawn and we should not invest in it. We see great potential in using the spare parts of such rolling stock for repairs. Thanks to this, we will reduce repair costs as much as possible.

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Marek Robert Zalesny, member of Ukrzaliznytsia’s board

 

On automatic distribution of railcars

We will develop a pilot program for automatic distribution of railcars before the end of the year. We will eliminate the human factor from the process of making decisions on distribution of railcars. We need to create a center for transport logistics, which will be the owner of all railcars. The essence of this system is that both railcars and decisions on their distribution should be concentrated in one hand, but the decisions should be automated. If all goes well, we will extend this pilot program to the entire railcar fleet. We plan to launch full operation of the system in mid-2017.

On increasing the number of railcars

I hope that the operations of the railway will be comfortable for customers if the number of railcars is increased in addition to launching an automated railcar distribution system. Currently, there is a shortage of about 3,000 railcars per day. That is a very large number. We want to buy 3,000 railcars with funds from the EBRD and resume production of railcars at our own enterprises. To ensure that users treat railcars more carefully, we want to make changes to the tariff. If railcars are being destroyed, then it is necessary to increase the tariff.

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Oleksandr Buzhor, member of Ukrzaliznytsia’s board

 

On debt restructuring

We believe that the tariff that we approved was the right idea because it will give us UAH 4.1 billion by the end of the year. This is necessary for our current funding because loan restructuring is one of the important tasks for Ukrzaliznytsia today. This process is currently underway. Out of the UAH 20 billion that was subject to restructuring, we are hoping to restructure an additional UAH 5 billion by September. Only the UAH 4 billion that is connected with the Donetsk Railway in one way or another will remain because it needs to be addressed separately.

On creation of an ERP system

The second major task that we face is creation of reports based on an ERP system. We understand the magnitude of this task, we are currently at the beginning of the task, and we are open to dialogue with representatives of various companies.

On Ukrzaliznytsia’s money

The funds (about UAH 7 billion accumulated in bank accounts) that the minister recently spoke about are concentrated mainly in accounts with Oschadbank. This is currently our main bank. When we discussed this issue at the beginning of the year, we chose the banks that offered the highest level of reliability. Currently, Oschadbank fully satisfies our needs. I will convince my colleagues that a significant portion of this money should be used to restructure the loan because this is one of the first problems that need to be addressed.